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The UK stock market shows no signs of weakening as the FTSE 100 continues to climb higher, coming within a few percentage points of 9,000. Meanwhile, the pound has grown stronger against the dollar, rising 2% in the past month.
Typically, a rallying stock market leads to falling yields as the two factors move inversely.
However, many top-performing FTSE dividend stocks have maintained their high yields by increasing dividends. The insurance and property sectors are still two of the best places to look for high-yield UK shares. Stocks like Phoenix Group, M&G, and Taylor Wimpey all maintain yields above 8%, despite enjoying 8% to 10% gains in the past month.
But that’s not the only place where investors can find the best UK dividend stocks to buy in 2025. I’m more interested in the potential of two smaller FTSE 250 dividend stocks that I own. OSB Group (LSE: OSB) and Primary Health Properties (LSE: PHP) are two of my favourite UK passive income shares and I think dividend-focused investors would be smart to consider them.
OSB Group
Barclays recently cut its price target for OSB Group to 635p from 650p. However, it maintains an Overweight rating on the stock, with the target representing approximately a 50% gain.
The Kent-based challenger bank has a 7.7% yield, ramping up dividends at a rate of 16.4% over the past five years. For 2023, total dividends amounted to 32p per share, a figure that looks likely to increase for 2024.
Recent price activity has been muted, with the shares down 1.12% in the past year. The subdued growth reflects weaker performance, with earnings per share (EPS) falling from £1 per share to 75p in 2023. EPS for 2024 is expected to come in at 82p when full-year results are posted on 13 March 2025.
Overall, analysts remain optimistic about the stock. Nine out of 11 have a Strong Buy rating with an average 12-month price target of 553p — a 30% gain.
Primary Health Properties
Like OSB Group, Primary Health Properties has been trading sideways, with the share price down 0.7% in the past year. The real estate investment trust (REIT) focuses on buying and letting healthcare premises like hospitals and doctors’ offices.
REITs tend to be popular UK stocks with those looking for high yields as the rules require them to return 90% of profits to shareholders as dividends.
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Labour’s sweeping budget reforms last October hit the REIT market hard, with prices falling across the board. But after hitting a five-year low of 86p last month, Primary Health took a surprise turn, gaining 7.3%. But it still has a long way to go to regain its five-year high of 168p.
Interest rates have been a key factor in the weakened performance, as the company relies on debt financing to fund property acquisitions. Recent rate cuts may have helped shore up the share price but it’s not in the clear yet. If the Bank of England’s rate cut plans don’t work as hoped, things could take a downward turn again.
Still, I think the FTSE 250 dividend stock, with its 7.6% yield and 20+ years of solid dividend growth, is one of the best for 2025.
